1,000 New People Added Each Day

Australia’s population has reached 24.5 million, putting us well on the way to reach 40 million by the middle of the century.

Based on
ABS estimates, the population is increasing by about 1,000 people a day, 350,000 a year and just over a million every three years.

Net overseas migration, the difference between arrivals and departures, accounts for 55% of total growth. The rest is natural increase, i.e. the difference between births and deaths.

Most of our migrants come from China, the United Kingdom and India, with 40% settling in NSW and 35% choosing Victoria.

Most future growth is expected to be in the big cities, with Sydney increasing from almost 4.8 million in 2016 to 8.12 million in 2056, and Melbourne
growing from 4.6 million in 2016 to 8.16 million in 2056.

Negative Gearing Myths Debunked

To put an end to debates over negative gearing, Graham Young, executive director of the Australian Institute for Progress, has proven that the biggest tax shelter goes to owner-occupiers, not investors.
His model uses history, not guesses about the future.

current tax laws, an owner-occupier with an initial 20% deposit would have received a 26.83% return per annum after tax. “This compares with the 15.86% an investor would have received on the same average property,” says Young.

The reason for this marked discrepancy is the fact that investors pay capital gains tax, whereas owner-occupiers don’t.

Young also modelled Labor’s proposed negative gearing changes. These changes eroded the returns to investors, but on the 20% deposit scenario, they were st

CBA Last Of The Banks To Cut Rates

Commonwealth Bank is the last of the big four banks to adjust its rates mix in an attempt to slow down riskier lending.

CBA will drop Principal and Interest variable rates for owner-occupiers by 0.03 percentage points and lift interest-only rates for both owner-occupiers and investors by 0.30 percentage points in response to APRA demands.
CBA’s owner-occupier interest-only variable rate will rise to 5.77%, with investors paying 6.24%.

CBA says borrowers on interest-only repayments can switch to Principal and Interest without a fee.

Earlier, the NAB cut its standard variable home loan rate for most of its owner occupiers, following a lead set by ANZ and Westpac earlier this month.

APRA requires the banks to reduce their interest-only lending from 40% to below 30% of their portfolios.


Rising House Prices Boost Spending

New research has found a positive relationship between changes in house prices for property investors and general levels of consumption.

The paper, entitled Housing Prices, Household Debt and Household Consumption, was compiled by the Australian Housing and Urban Research Institute and found that middle-aged home-owners were more likely to increase their expenditure or borrow more than the younger or older demographics.

Before the GFC, an increase in housing values correlated with an increase in consumption for old-aged households and middle-aged households. This moderated slightly after the GFC.

The findings indicate the increases in housing prices affect household consumption through the relaxation of a credit or collateral constraint that enables households to increase their borrowing in order to finance consumption


House Price Growth Tipped To Slow

The National Australian Bank predicts that city house prices will grow about 4.3% on average next year, half the current rate in four of the capital cities.

The reduction will be brought about because of rising rates, tougher regulation and falling affordability.

Other factors contributing to the scenario include slow wages growth, falling overseas demand, low rental yields and a big increase in apartment supply in some cities.

Apartment values are expected to fall 0.4% on average, according to the bank’s analysis.
“On a more positive note, population growth is expected to remain solid, especially in Victoria, helping to drive underlying demand and soak-up some of the feared excess in
supply,” says the NAB report.

“Ongoing strength in housing demand is expected to help offset supply concerns, although policy responses are creating additional uncertainty,” the report says.

Quote of the week


“An astounding 41% of loans on the Big4 banks’ books are interest-only. That’s a huge proportion of Australians who aren’t paying off a single cent of debt. It’s no wonder APRA is coming down hard. They want Australian mortgage holders to go on a debt-diet. Paying interest-only, particularly when you are an owner-occupier, is an expensive business.”

RateCity Money Editor Sally Tindall